Ladies and gentlemen, thank you for standing by and welcome to the StealthGas Fourth Quarter 2018 Call. [Operator Instructions] I must advise everyone that today’s conference is being recorded on Thursday, February 21, 2019. I shall now hand over to your first speaker for today, Michael Jolliffe. Please go ahead, sir.

Thank you very much. Good morning, everyone and welcome to our fourth quarter 2018 earnings conference call and webcast. This is Michael Jolliffe, the Board Chairman of StealthGas. With me today is our CEO, Harry Vafias and our Finance Officer, Fenia Sakellaris who will discuss our financial performance at a later stage of our call. Before we commence our presentation, I would like to remind you that we will be discussing forward-looking statements, which reflect current views with respect to future events and financial performance. At this stage, if you could all take a moment to read our disclaimer on Slide 2 of this presentation. Risks are further disclosed in StealthGas filings with the Securities and Exchange Commission. I would also like to point out that all amounts quoted unless otherwise clarified are implicitly stated in United States dollars. Slide 3 summarizes the key highlights of the fourth quarter and full year end results we released today. Overall, our performance in quarter for ‘18 was not as positive as we had hoped in terms of revenue generation levels and operational utilization as some early signs of the early Asian market improvement, evident mid-half in the fourth quarter of ‘18 neither lasted nor prevailed. It was a rather disappointing quarter for owners operating in the Asian market with minimal opportunities for period fixtures, thus leading owners to operate in the spot market, earning poorer rates in order to minimize idle time. Our quarterly results were also affected by the $1.2 million of ballasting costs we incurred for the reposition of 3 of our small LPG vessels, significantly increasing our voyage costs. This last quarter of the year, we achieved an operational utilization of 94.5%, a lower than expected performance for the reasons explained above. Compared to the same quarter of 2017,…

Thank you, Mr. Jolliffe, and good morning to everyone. I will continue the presentation focusing on our financial performance for the fourth quarter and 12 months of 2018. As explained at the beginning of our call, our performance in the fourth quarter of ‘18 was undermined by lower-than-expected spot revenues and increased voyage costs incurred from the ballasting of 3 of our small LPG vessels. Our operational utilization of 94.5% was a rather flat performance for a fourth quarter as lower-than-anticipated time charter activity led to higher-than-estimated off-hire days. Let us move on to Slide 7, where we see the income statement for the fourth quarter of ‘18 against the same period of the previous year. Voyage revenues came at $38.5 million, marking a rise of $100,000 compared to the same period of last year despite having two less owned vessels in the fleet and soft spot revenues as these were counterbalanced by higher day rates of our period fixtures. In order to be more precise as to the low revenues from the spot market, the 9 vessels that operated during the fourth quarter in the spot market generated about $2.5 million to $3 million lower revenues compared to the third quarter of ‘18, while operating at a lower TC margin of close to 50%. Voyage costs amounted to $5 million, marking a $1 million increase compared to Q4 ‘17. This increase is an outcome of about 52% high number of spot days and almost $1.2 million of voyage costs incurred for the repositioning of 2 small LPG vessels from Asia to Europe and the repositioning of yet another of our small LPG vessels to Asia. Net revenues that is revenues after deducting voyage costs, came at $33.5 million, corresponding to a net revenue margin of 87%. Running cost of…

Let’s proceed with Slide 11. China’s LPG import growth is anticipated to accelerate this year. In 2018, propane and butane shipments to China marked a rise of 1% compared to 2017 as no new PDH plants came online. However, this year, we have three new PDH plants with an estimated total propane requirement of about 1.9 million tons per year scheduled for commissioning, a fact that will boost the country’s demand for imports. As a per the import tariff on U.S. LPG that came into effect last August, China has switched sourcing to other countries, mostly from the Middle East, thus not directly affecting the small LPG segment. It can be argued, though, particularly when witnessing the slowdown of the Asian LPG market, that the negative sentiment around imposed tariffs has indeed affected both the spot and time charter activity in the region. On Slide 12, we see that during Q4 ‘18, rates for small LPGs in the West tracked upwards. This rise was mainly driven by seasonal factors. The rates in Asia, particularly the spot rates, were rather disappointing for most of the owners with few available cargoes paying very row rates. The fact that during Q4 2018, time charter rates in Asia remained flat is quite positive as, in our view, reflects expectations for a better market this year. In terms of trade, West of Suez owners enjoyed a firm spot market, particularly towards the end of last year. During December, we saw spot rates around historic highs for the 3,500 cubic meters ship and 5,000 cubic meters ship – pressurized ships. Even levels above 20,000 a day were achieved on short voyages in Northwest Europe. On the time charter market, there has been some activity, and the sentiments stayed firm in the end of last year when…

Thank you, Harry. Our performance in the fourth quarter of 2018 did not reflect the strength typically associated with the fourth quarter of the year, which usually benefits from the seasonal factor of winter in the northern hemisphere. This year, unfortunately, although the European market was strong, the Asian market followed the opposite course with low rates and subdued time charter activity. These elements impacted our revenues and prevented us from enjoying a profitable quarter. We anticipate, however, that the market sentiment in Asia will gradually turn favorably, and our company is well positioned to take advantage of this opportunity. Demand for LPG is strong, the order book is very low and time charter rates for those contracts being fixed have remained at high levels notwithstanding the Asian market slowdown. This leads us to conclude that the solid market fundamentals will eventually lead to a market correction. As for our strategy and plans for this year, we recently completed the 7-vessel sales we had announced in 2018, thus considerably strengthening our liquidity and lowering our fleet’s average age. In addition, our recently agreed small-scale joint venture with a third-party investor not only enhances our liquidity further, but most importantly provides an opportunity for further company growth at a time when our segment’s basic fundamentals look promising. We have now reached the end of our presentation, and we would like to open the floor for your questions. So, operator, please open the floor. Thank you.

Thank you very much sir. [Operator Instructions] Our first is from James Jang, the Maxim Group. Please go ahead.

Hi good afternoon guys. So, can you talk a little bit more about the joint venture? Who I mean, who is this? Is this a firm, is this an individual investor, a ship-owning family?

As you can understand, because this organization is not a publicly listed entity, we are not allowed to disclose obviously who they are. What we can say, as we’ve already announced, is a firm with great shipping expertise in a variety of shipping segments. So, we’re really glad that they decided to buy our ships at NAV when, of course, our stock is trading at such a big discount to NAV. So, it’s a testament that they think it’s going to go well. It’s a good point in the cycle to invest, and we are going to be partners maybe on more ships too in the future.

So, piggybacking off of that, are you looking to make some strategic acquisitions this year? Because I know you sold off a number of older tonnage last year. So, should we look at ‘19 as an opportunity for StealthGas to build up the fleet again?

We already have the largest fleet in the world in that sub-segment, James, you know that. So, it’s a matter of many things. It’s a matter of the market. It’s a matter of the prices we can see from these vessels being sold. It’s a matter of what happens to the stock. It’s a matter of a lot of things. We have our ears and eyes open for everything. We look at everything. And of course, we propose it to the board. And the board decides what is best to do. Yes, we would like to replace some of the ships sold. But obviously, that’s not the number one priority right now. The number one priority is try to make us much money from the existing fleet.

Okay. And then you have 6 vessels on spot right now. What’s the plan for those? Do you want to play them on the spot to take advantage of the upside coming in rates or are you looking for a shorter-term cover for these?

Good question. Again, depends on what numbers we’re going to see. If we see the Asian market strengthening and we can fetch some good period rates, yes. My proposal to the board would be to fix them. If we see the Asian market continuing to struggle, then, obviously, my proposal would be if to fix for a short period in order to have the optionality afterwards.

Okay. So, with the Asian market, I know the fourth quarter was unseasonably warmer. But right now, it seems like that the market Northern Northeast Asia is pretty cold. Has the rate started to improve?

Normally, for us, Q4 is a really strong quarter. So, it was surprising that Q3 was a stronger quarter than Q4. Season I mean, temperature was one thing. It was a lot of other things together, I think. It’s a bit early to say because the Chinese New Year, as you know, finished like a few weeks before. But yes, as we just read, we’re seeing encouraging signs. Let’s hope they last, but it’s a bit too early to judge.

Okay alright. That’s all I have. Thank you guys.

Thank you.

Our next question is from Randy Giveans from Jefferies. Please go ahead.

Hi, guys. How are you?

Hi Randy.

So yes, on the last earnings call, you mentioned 4Q utilization would be above 3Q. Obviously, that wasn’t the case. A lot of it was the deterioration of the Asian LPG market, maybe some of the kind of repositioning on the smaller vessels. But can you give some guidance for 1Q ‘19? What do you expect utilization to be there and if higher, what specifically on the demand side is going to push it up to 95%, 96%, 97%?

Yes. I mean, I got it wrong on that quarter, Randy. I take blame for that. We if you see our last few years’ results, Q4 is a good quarter from, at least, a utilization point of view. Obviously, with more ships bought in a weak region, that leads to lower utilization either we like it or not, unfortunately. Q1, I can say that we hope to be between Q4 and Q3, meaning better than Q4, but worse than Q3.

Okay, perfect. That’s good guidance. And then, yes, following up a little bit on this kind of joint venture, you sold, I guess, 49.9% interest in to 5,000 CBMO LPG carriers. What was the total sales price for these? And is the priority to kind of sell more of your own vessels into this or is the focus for acquiring secondhand vessels from maybe one of your peers?

Listen, we have not announced the price. But you, as a very thorough analyst, I’m sure you can find out the price because it’s already been circulated by our, by the gossiping brokers. So, I’m sure you can find out the price. What I can say is that when your stock is trading at a 60% or 70% discount to NAV and you can sell 2 11-year-old ships at NAV and still keep control of them, then it’s not a very difficult decision to make.

I agree and that is a great segue. So last quarter, on the earnings call, you mentioned you will possibly I think was the term look at buying back shares in 1Q ‘19. Now with your cash balance at $65 million just on the unrestricted portion, plus now kind of infusion liquidity with this joint venture, all these other things, your stock trading in your estimation at 25% or so of NAV, are you going to repurchase any shares this quarter?

The thing we said last quarter was depending on the profitability and the performance of Q4, we will decide in Q1 if we’re going to do that. Unfortunately, as it’s obvious, Q4 was much weaker than expected, and therefore we did not even dare to propose a buyback at a time when we don’t know what will happen in Q1. If obviously in Q1, we have a much stronger quarter and obviously this cash that we have is at this approximately the same levels, yes, obviously we will buy stock and we have done that in the past. As you remember in the last buyback program, we spent $23 million to buy our own stock. So, we’re not afraid to spend considerable money to buy our own stock. But we have to firstly secure the company. The strong balance sheet we have is a great testament to the banks. That’s why we achieved the refinancing of some of the 2020 balloons at very attractive terms, quite cheap margins, but yes, the buyback has to happen when we know that the market is heading to the right direction. At the moment, it’s again slightly early. We will know, I guess, in the next 2 to 3 months.

Okay, that’s fair. And then can you give a little more details around those 5 recently completed time charters, what is the kind of average rate for those?

It will make it more difficult if we tell you, because it’s different sizes and different ages of ships. It’s best if we discuss that on a separate call and we can give you some color. But we cannot just give a number because, as you can understand, region, age and size, makes, a huge difference on the numbers you hedge.

Yes, absolutely. Alright that’s it for me. Thanks again.

Thank you.

[Operator Instructions] The next is from David Sachs from Hocky Group. Please go ahead.

Hi Harry. How are you doing?

Hi David.

So, if you could so I was looking at the balance sheet and you identified the cash. Could you just describe that the restricted cash, what components are there? And then of the net vessels held for sale, what would have already cashed in on the sale of the 2 vessels from last year that closed in January and February? And would the balance be the 2 vessels that are going into the joint venture?

Sorry. I lost you because you asked two different things at the same time.

Start again. So net vessels held-for-sale, we had roughly $65 million in value against $30 million in debt. What portion of that was ascribed to the two vessels that have closed already from the 2018 group of vessels being sold? And then would the balance be the two vessels that were going into the joint venture?

We don’t know here, David. Please understand. We’ll come back to you. I don’t have this information in front of me.

Okay. So, if I look at your current balance sheet, assuming the 2 vessels that were announced in January and February have closed, the JV occurs, we will have taken in an additional $65 million and paid off $30 million of debt based on what your balance sheet shows. That would put our pro forma cash over $100 million, plus we’d have this restricted cash. I’m not sure why it’s restricted. Are you following that? So is that kind of the point of?

I don’t think the numbers are quite right. I don’t think the numbers are quite right.

Okay. Reading them off your balance sheet, okay.

Yes, they are not quite right. We have not – we don’t have estimates for $100 million in cash. We hope we have, but the numbers we have do not show $100 million in cash.

Okay, I will send it in an e-mail. And can you update us on the current market for the SRs, your 3 MRs and your Afra in terms of where they’re out at spot rates today and kind of your philosophy on what you’re planning to do with the 4 SRs over the next year or 2 or 3?

The SRs are the same state they were last quarter. They’re fixed on period as we have discussed it.

Right. But we’re coming that they were if I recall, when they came when you took delivery, you put them on 1-year charters and will be coming into a period of renewal. Just checking to see?

No, that’s not correct. That’s not correct. If I remember rightly, one was on 1-year. The other 2 were on 2-year charters. And the last year the last one was in 1 year, but it started much later, so it has some time to run.

Okay. So, our first decision period on one of the SRs would be in the second quarter or third quarter of this year?

It’s on the slide we have. I mean, [Foreign Language] the first one is the Freeze, which opens around April.

Okay. And our current spot rates, if we were going to renew, at or above?

Between 15 and 16.

What was that, Harry?

Slightly above.

Slightly above, okay. And then in terms of the, your 4 tankers, can you discuss sort of your thoughts on being in the tanker business in general, why you think it’s an appropriate asset base for StealthGas to have given your coaster focus? At least your business strategy seems to be focused on your?

I think David that we have discussed more than 6 times in the past.

Well, that’s with me separately. I’m hoping you can broadcast your thoughts.

Yes. But with you separately, I don’t need to tell you for the seventh time why we bought the tankers. I think I have explained to you with numbers 6 times already. If you want me to talk about the market, I’ll be very glad to do so. But why we bought the tankers, I think you know it better than me.

Not saying why, just updating us on your philosophy on the current market and your strategy with these assets going forward?

The market was excellent in Q4, has weakened in Q1. We hope it re strengthens in Q2 onwards because of the IMO 2020 regulations. The values are close to the law. So obviously it’s not the right time to sell. We have discussed that extensively. All the ships are on period. So, they’ve not been suffering the ups and downs of the spot market. And the first one to open is the Falcon, which opens in about a month’s time.

Alright. Thanks Harry.

Thank you very much. [Operator Instructions] And we have a follow-up from James Jang from Maxim Group. Please go ahead.

So, Harry, I got a follow-up on the tankers. So, I know why you bought them and everything else. I just want to know, has your strategy changed on them recently? Because it seems the tanker market, especially for the MRs and the Afras look really pretty promising as we get into 2020. Could these vessels become a core part of StealthGas long term?

Not really because they’re not brand-new vessels anymore. We bought them as brand-new vessels, but now they’re about 10 years old.

So even if the market is really strong, you would still consider getting out of the segment and focusing more on the LPG space long term?

James, as you know well, the shipping companies that make the money are the ones that sell the assets at the peak of the market. So yes, that would be the idea.

Perfect. Alright, thank you.

Thank you.

And there are no further questions at this time.

Okay. Mr. Jolliffe will conclude.

Thank you, Harry. Much appreciated and thank you to all our guests. We would like to thank you for joining us at our conference call today and for your interest and trust in our company. We look forward to having you with us again at our next conference call for our first quarter 2019 results in May. Many thanks to all of you. Bye-bye.

Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may now disconnect your lines.